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BUZZ-VIEW FROM THE BUYSIDE-Henderson's Charlie Awdry dips toes back into Chinese banks
April 24, 2017 / 10:59 AM / in 8 months

BUZZ-VIEW FROM THE BUYSIDE-Henderson's Charlie Awdry dips toes back into Chinese banks

LONDON, April 21 (Reuters) - ** Henderson China Opportunities Fund manager Charlie Awdry buys back into Chinese banks after 18 months as a better-than-expected corporate profitability eases worries over bad debts

** “We have had a change of heart in a sector that’s pretty controversial,” says Awdry

** ”Chinese credits as a whole are slightly better quality than the market is believing. “If the cycle follows, those non-performing loans may well have peaked,” he says.

** China Construction Bank now in fund’s top ten holdings. Also bought Bank of China

** Sees economic cycle in China as more robust than expected. Corporates experiencing a positive profit and cashflow cycle, with improving outlook for profit growth

** Quality of banks’ balance sheets therefore likely to be better

** Awdry points to more discipline in corporates’ capital allocation, and increasing dividends, particularly in energy sector with coal company Shenhua recently setting a special dividend

** At the same time, growth stocks “getting pretty punchy in valuations” - internet company Tencent trades on 34 times 2017 P/E.

** “At some point we have to think how much potential for upside surprises is there in growth, and how much is there in value stocks”

** Fund is not overweight Chinese financials as a whole

** “There’s a lot of icebergs floating around in the Chinese financial sector, and as a result you want to be in the ones which have biggest returns”

** To make way for bank stocks, fund lightened allocation in some tech stocks including ASM Pacific, healthcare stocks including Jiangsu Hengrui and CSPC Pharma

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